Date: April 10, 2016
1. Financing from Subsidiaries. Explain why an MNC parent would consider financing from
Since interest rate vary among currencies, the cost of borrowing can vary substantially
among these countrie
Measuring Exposure to
Exchange Rate Fluctuations
for Exchange Rate Fluctuations
Exposure the degree to which a company
is affected by exchange rate changes
Risk the variability of a firms value due
to uncertain changes
Chapter 8: Relationships among Inflation, Interest Rates and Exchange Rates
Purchasing Power Parity (PPP)
Purchasing power of a consumer will be similar when purchasing goods in a
foreign country or in the home country.
Pesos per dollar = peso price of th
Quyen Ha-Fin 72
1. Motives for DFI. Describe some potential benefits to an MNC as a result of direct foreign
investment (DFI). Elaborate on each type of benefit. Which motives for DFI do you think
encouraged Nike to expand its
The video Currency effect on trade shows that the influence of floating exchange
rates on trade balances. The presenter used Chinese and the U.S entrepreneurs as
examples. The Chinese company wanted to sell 100 dolls for 10 RMB each in the U.S
1. MNC Parents Perspective. Why should capital budgeting for subsidiary projects be
assessed from the parents perspective? What additional factors that normally are not
relevant for a purely domestic project deserve c
1. Capital Structure of MNCs. Present an argument in support of an MNCs favoring a
debt-intensive capital structure.
Debt-intensive capital structure involves to cash flow stability, growth oriented, and
lower risk guarantees on
1. Forms of Country Risk. List some forms of political risk other than a takeover
of a subsidiary by the host government, and briefly elaborate on how each factor
can affect the risk to the MNC.
Some forms of political risks are:
Date: April 24, 2016
1. International Cash Management. Discuss the general functions involved in international
cash management. Explain how the MNCs optimization of cash flow can distort the
profits of each subsidiary.
The general func
1. Motives for Restructuring. Why do you think MNCs continuously assess
possible forms of multinational restructuring, such as foreign acquisitions or
downsizing of a foreign subsidiary?
MNCs continuously assess possible
Date: April 3, 2016
1. Bankers Acceptances.
a. Describe how foreign trade would be affected if banks did not provide trade-related
If the banks did not provide trade rated services, foreign trade would be reduced
DATE: MARCH 27, 2016
1. Floating-Rate Bonds.
What factors should be considered by a U.S. firm that plans to issue a floating rate bond
denominated in a foreign currency?
The factor should be considered to issue a floating rate bond den